Why is it that even when faced with obvious pressures to change many businesses find it so difficult to do?
In January 2012 I wrote about ailing UK roadside restaurant chain Little Chef (more here…). It had so determinedly refused to change with the times, to evolve, that it shrank to be a pale imitation of its former self that once dominated roadside eateries in the UK. Now it seems that McDonalds is facing pressure to adapt to changing tastes and evolve too, particularly in the US and Asia, where sales have slumped over the past few years. Global sales fell by 1.7% in February alone with a 4% fall in the US, and a 4.4% fall in Asia-Pacific, though European sales rose by 0.7%.
The primary reason that businesses and brands disappear over time is their inability to evolve. In some cases evolution is a very hard “ask” as market or technological changes completely change the competitive environment and the changes required are just in the too-hard-to-do category; but they are in the minority, most businesses can change, adapt, and survive, but sadly many don’t. It’s like the proverbial rabbit in the headlights – they just stare at the problem hoping it will go away without even trying to move out of the way.
Why? Why do businesses appear to choose decline and fall rather than Life, to paraphrase Mark Renton, the lead character in Irvine Welsh’s Trainspotting? In my opinion it is often a failure of leadership. Businesses follow a punctuated evolutionary path. Periods of growth and stability are punctuated with transitional moments when you need to change things, often many things, all at once. The leaders who excel in the good times rarely do so well in the transitional moments and that is why you often get CEO’s leaving rather inexplicably at the top of a cycle – when things appear to be going well, because they know they have rabbit tendencies and they can see the car coming. Is it just coincidence that these recent announcements came just after a change of CEO at McDonalds?
I have often been in the position of change agent in, admittedly much smaller, businesses going through this sort of transition and it really isn’t easy. It must be a real challenge in a business with the market inertia that McDonalds has. It might be difficult to do, but what needs to happen is really disarmingly simple:
- The McDonalds proposition now needs to evolve to be more competitive in today’s market. This must include an evolution of the product range, but it may also include changes to several other elements of its marketing mix too.
- Meanwhile the fundamental positioning of the brand needs to stay the same. You might characterise that as: ubiquitous, convenient, American, and inexpensive. To my mind, there are a lot of ways to bring the concept of “American” up to date internationally: perhaps it should become more Wholefoods than Walmart.
- Any new ideas need to be thoroughly tested in all markets and deployed carefully.
- Once the leadership cadre has decided what it wants to do, and it is confident it will work, it needs to align everything behind this new positioning and make it happen, no matter what internal opposition there might be.
I am personally quite optimistic about McDonalds’ ability to do this and for a new McDonalds to emerge from a necessary transition that should see it begin to grow again. When faced with the Super Size Me backlash some years ago it radically changed its menu and for a time at least it was hard to see the burgers beneath the salad leaves, but its enthusiasm for new, demonstrably “healthy”, menus seems to have waned a little. I doubt though that we’ll see much rabbit on the menu. Someone told me that McDonalds had once considered shrimp on the menu but there aren’t enough shrimp fished globally each year to supply them – I don’t care if that is true or not, I just like the story which at least hints at the scale of its current problem. Anyway, even if there isn’t any rabbit on the menu it would be good for shareholders if there weren’t any in the boardroom either, staring in the headlights and unable to move out of the way of what appears to be a fast car heading their way.